Digital Media Solutions, Inc. (NYSE:DMS) shareholders are doubtless heartened to see the share price bounce 75% in just one week. But the last three years have seen a terrible decline. To wit, the share price sky-dived 90% in that time. So we're relieved for long term holders to see a bit of uplift. But the more important question is whether the underlying business can justify a higher price still. While a drop like that is definitely a body blow, money isn't as important as health and happiness.
While the last three years has been tough for Digital Media Solutions shareholders, this past week has shown signs of promise. So let's look at the longer term fundamentals and see if they've been the driver of the negative returns.
View our latest analysis for Digital Media Solutions
Because Digital Media Solutions made a loss in the last twelve months, we think the market is probably more focussed on revenue and revenue growth, at least for now. When a company doesn't make profits, we'd generally expect to see good revenue growth. That's because it's hard to be confident a company will be sustainable if revenue growth is negligible, and it never makes a profit.
Over three years, Digital Media Solutions grew revenue at 22% per year. That's well above most other pre-profit companies. So why has the share priced crashed 24% per year, in the same time? You'd want to take a close look at the balance sheet, as well as the losses. Ultimately, revenue growth doesn't amount to much if the business can't scale well. Unless the balance sheet is strong, the company might have to raise capital.
You can see how earnings and revenue have changed over time in the image below (click on the chart to see the exact values).
This free interactive report on Digital Media Solutions' balance sheet strength is a great place to start, if you want to investigate the stock further.
A Different Perspective
The last twelve months weren't great for Digital Media Solutions shares, which performed worse than the market, costing holders 71%. The market shed around 11%, no doubt weighing on the stock price. Shareholders have lost 24% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. Although Baron Rothschild famously said to "buy when there's blood in the streets, even if the blood is your own", he also focusses on high quality stocks with solid prospects. It's always interesting to track share price performance over the longer term. But to understand Digital Media Solutions better, we need to consider many other factors. Take risks, for example - Digital Media Solutions has 4 warning signs (and 1 which makes us a bit uncomfortable) we think you should know about.